If Payson raised the property tax rate to the maximum, it would cost owner of a $200,000 house $4.86 annually

A divided Payson Town Council Thursday voted to start the potentially contentious process of boosting the town’s property tax rate to raise an extra $73,000 for next year’s stressed-out budget — a move that would add less than $5 to the tax bill on a $200,000 house.

Over the strenuous objections of Councilor Mike Vogel, the council directed town staff to schedule a public hearing on the proposal. That hearing will likely come before the July 7 deadline for adopting the final budget for 2009-10.

Mayor Kenny Evans said the town’s property tax rate is just below its legal limit. Raising the tax to the limit would require a homeowner to pay an extra $2.23 per $100,000 of assessed valuation. “That’s $4.86 per year (for a $200,000 house),” said Evans. “We’re talking about 20 cents a month” per person in the average, two-person household.

“In a normal year, fine,” said Vogel. “But when you’re talking to someone losing their home, then 20 cents is a lot. “With the economy the way it is, I just can’t do it this time.”

Evans said the vote Thursday merely started the process, so the council could hear from the public. “From your comments, my understanding is you don’t even want to talk about it.”

Vogel said a study of the town’s housing needs documented the seriousness of the problem facing many Payson families. “That study said we’ve got 170 families living in the woods. Now $10 to me is no big deal, but if you’re talking to those people, it’s going to mean a lot to them. At this time, I don’t think we ought to even discuss” raising the property tax rate.

“But this is exactly when we need to talk about it,” said Councilor John Wilson, in reference to the town’s budget woes. The proposed budget for next year includes a roughly 5 percent increase in operating costs and a loan from the town’s water department to create a wafer-thin $571,000 contingency fund. “If we raise the (property tax) rate a nickel per $1,000 assessed value, that is so small it won’t hurt anyone.”

“The limit is 2.2 cents” per $1,000 assessed value, corrected Evans.

“So we’re talking about $5 per year,” continued Wilson.

“$4.86,” said Evans.

Councilor Ed Blair interjected “$4.86 for those of us with $200,000 homes won’t mean anything — and the people in the forest won’t be paying anything” since they don’t own homes.

“Ten bucks is nothing …” began Vogel.

“Five bucks,” said Wilson.

“Ten bucks as the value goes up,” said Vogel. “But always it’s the people that already have it that want to pass it along to those who don’t.” He said the town had already raised the dog license fee and other town fees.

The council voted 6 to 1 to direct town staff to set a hearing date, with Vogel voting in dissent.

The council could not agree on whether to designate what it would spend the extra $73,000 on should it decide to raise the rate. Even without raising the rate, an increase in new construction and the assessed value of existing homes will likely boost property tax revenue next year by $20,000. Although appraisers say the average home in Payson has dropped in value by 10 to 30 percent in the past year it takes years for those declines to show up for tax purposes.

The council wrestled with whether to maintain as much flexibility as possible or to build public support by designating the money for a specific purpose.

Councilor Blair noted that the town could use part of the extra money to restore a proposed $50,000 cut in its contract with the Humane Society.

In the end, the council decided to just schedule the public hearing for now, without yet deciding what to do with the extra money.